海港企業有限公司 ANNUAL REPORT 2016 海港企業有限公司 股份代號 : 51 Stock Code : 51 年報 二零一六年年報

Transcription

1 Stock Code : 51

2 The Murray, an iconic urban chic hotel, is scheduled to open in late CORPORATE PROFILE Harbour Centre Development Limited (stock code: 51) is a listed subsidiary of The Wharf (Holdings) Limited (stock code: 4), with property and hotel development and investment in Hong Kong and the Mainland as its primary business. Flagship assets in Hong Kong include Marco Polo Hongkong Hotel in Harbour City, Tsim Sha Tsui, and The Murray, a 336-room Niccolo hotel being converted from the iconic Murray Building in Central. Marco Polo Hongkong Hotel has long been a core operating asset while The Murray is targeted for opening in late In the Mainland, the Group owns 80% of Suzhou International Finance Square, an investment property under development which will comprise Grade A offices, luxury apartments and a premium boutique hotel. As at the end of 2016, the Group s attributable development land bank had declined to about 0.7 million square metres in Changzhou, Chongqing, Shanghai and Suzhou.

3 CONTENTS 2 Corporate Information 54 Consolidated Statement of Comprehensive Income 3 Chairman s Statement 55 Consolidated Statement of Financial Position 5 Financial Highlights 56 Consolidated Statement of Changes in Equity 6 Business and Financial Review 57 Consolidated Statement of Cash Flows 12 Environmental, Social and Governance Report 59 Notes to the Financial Statements 15 Corporate Governance Report 94 Principal Accounting Policies 29 Directors Report 112 Principal Subsidiaries, Associate and Joint Ventures 46 Independent Auditor s Report 115 Schedule of Principal Properties 53 Consolidated Income Statement 116 Ten-Year Financial Summary

4 CORPORATE INFORMATION BOARD OF DIRECTORS Chairman Mr Stephen T H Ng Non-executive Directors Hon Frankie C M Yick, JP Mr Kevin C Y Hui Independent Non-executive Directors Dr Joseph M K Chow, OBE, JP Mr H M V de Lacy Staunton Hon Andrew K Y Leung, GBS, JP Mr Michael T P Sze Mr Brian S K Tang COMPANY SECRETARY Mr Kevin C Y Hui, FCCA, CPA AUDITORS KPMG, Certified Public Accountants PRINCIPAL BANKER The Hongkong and Shanghai Banking Corporation Limited REGISTRARS Tricor Tengis Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong REGISTERED OFFICE 16th Floor, Ocean Centre, Harbour City Canton Road, Kowloon, Hong Kong Tel: (852) Fax: (852) Website: 2 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

5 CHAIRMAN S STATEMENT The Group started to invest in Development Properties ( DP ) in China in Since it started to bear fruit in 2012, this segment has been dominating the Group s financial performance. Its share of Group core profit once ranged up to nearly 70%. However, against the backdrop of depletion of the land bank from the sale/presale of 93% (and sales recognition of 80%) of developable GFA up to the end of 2016, DP contribution to the Group will start to recede after In 2016, DP recognition declined due to project timing, while soft markets overshadowed the performance of the Investment Properties ( IP ) and Hotel segments. Group core profit decreased by 36% to HK$762 million (2015: HK$1,194 million) and core earnings per share by 36% to HK$1.08 (2015: HK$1.68). Total dividend per share for 2016 will decrease by 29% to 50 HK cents (2015: 70 HK cents). Revaluation of the IP portfolio at year-end has resulted in a deficit of HK$70 million or 1% for the year. Group profit decreased by 44% to HK$692 million (2015: HK$1,231 million). Net cash increased to HK$1,904 million by year-end. Net asset value was HK$22.33 per share, or HK$27.84 per share if the Group s hotels were restated at market value. THE YEAR IN REVIEW In Hong Kong, clouds loomed over the retail and hospitality sectors as the strong local currency and competition from neighbouring destinations continued to divert both visitors and locals. Total visitor arrivals and retail sales in 2016 decreased by 4.5% and 8.1% respectively. That continued to impact the local economy and hence the Group s IP and Hotel businesses. In the Mainland, lower sales recognition reduced DP profit. At the same time, despite a more favourable market due to the government s loosening measures, contracted sales in 2016 fell to RMB3.4 billion (2015: RMB5.3 billion) on an attributable basis. New cooling measures were implemented towards the end of the year and will add uncertainties to selling conditions in On the hotel front, the performance of Marco Polo Changzhou, while still in pre-stabilisation mode, improved amidst difficult trading conditions. OUTLOOK 2016 ended with a slew of geopolitical surprises. Global growth remained tepid with the nagging political and economic uncertainties may be another year beset by unfavourable currency conditions, interest rate hikes and geopolitical threats. Plenty of political or geopolitical uncertainties including a new unorthodox U.S. presidency, the unfolding of Brexit, soaring protectionist sentiment and a series of general elections in Europe largely shape the outlook for HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

6 CHAIRMAN S STATEMENT Mainland China is also expected to face a tremendous challenge. Uncertainty in traditional export markets and a structural adjustment to a domestic consumption-led growth model may further rein in its economic growth pace. Rising trade tension and a possible trade war will pose a significant downside risk to China. It is still too early to judge whether Hong Kong s retail and hospitality sectors are bottoming out. The Hong Kong government has been stepping up its promotional efforts to achieve a more balanced portfolio of inbound visitors to resuscitate the bruised tourism sector. However, a rapid recovery is unlikely in the near future. The Group will closely monitor the risks ahead and properly evaluate their implications to the Group s business. While China DP continues to gear down, sales recognition is budgeted to rebound in However, the significant depletion of the project pipeline will reduce DP contribution after In Hong Kong, The Murray, a 336-room Niccolo hotel converted from the iconic Murray Building in Central, has commenced to ramp up pre-opening expenses to prepare for opening in late Building and land costs will be depreciated over the life of the land lease. In China, Suzhou International Finance Square, comprising Grade A offices, luxury apartments and a premium boutique hotel with full scenery of the city, is targeted for opening by Initial expenses for these new IP and Hotel projects will weigh on the Group s cashflow and profits in their early years. It will take time for them to reach maturity and stabilisation. Substantial net cash outflow is budgeted for On behalf of all Shareholders and my fellow directors, I wish to express my deepest gratitude and appreciation to all customers, staff and business partners for their support over the years. Taking this opportunity, I also wish to pay special tribute to Mr H M V de Lacy Staunton, our Director for 16 years who is retiring at the coming Annual General Meeting and not standing for re-election, for his invaluable counsel and contributions to the Board. Stephen T H Ng Chairman Hong Kong, 2 March HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

7 FINANCIAL HIGHLIGHTS HK$ Million HK$ Million Change Results Revenue 3,558 5,048 30% Operating profit 969 1,622 40% Core profit (Note a) 762 1,194 36% Profit attributable to equity shareholders 692 1,231 44% Total dividend for the year % Earnings per share Core profit (Note a) HK$1.08 HK$ % Reported profit HK$0.98 HK$ % Dividend per share First interim HK$0.14 HK$0.14 Second interim HK$0.36 HK$ % Total for the year HK$0.50 HK$ % Financial Position Total assets 28,114 29,651 5% Total business assets (Note b) 20,659 20,707 Net cash 1,904 1, % Shareholders equity 15,829 16,185 2% Total equity 16,546 17,330 5% Number of issued shares (in million) Net asset value per share HK$22.33 HK$ % Net debt to total equity N/A N/A N/A Profit to shareholders Shareholders equity Earnings per share Financial year Core profit Reported profit Total equity Total Per share Core profit Reported profit Dividends per share HK$ Million HK$ Million HK$ Million HK$ Million HK$ HK$ HK$ HK$ ,945 5, ,763 7, ,877 9, ,015 11,440 10, ,096 12,279 11, ,937 3,058 15,563 14, ,464 1,276 16,447 15, ,082 17,246 16, ,194 1,231 17,330 16, ,546 15, Notes: (a) (b) Core profit excludes changes in investment property revaluation. Business assets exclude unallocated corporate assets mainly comprising equity investments, deferred tax assets, derivative financial assets and bank deposits and cash. (c) Ten-Year Financial Summary is detailed on page 116. HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

8 BUSINESS AND FINANCIAL REVIEW BUSINESS REVIEW Development Properties ( DP ) in China has been dominating financial performance since Its share of Group core profit once ranged up to nearly 70%. However, 93% of developable GFA have been sold/pre-sold (and 80% recognised) up to the end of The land bank has not been replenished and depletion will continue. In parallel, performance of the recurrent Investment Properties ( IP ) and Hotel segments was slowed by soft markets. As a result, Group core profit declined by 36% to HK$762 million (2015: HK$1,194 million). Hong Kong Investment Properties Rental income for the Group s portfolio retreated amidst challenging trading conditions. This portfolio was independently revalued at year-end, and reported a net revaluation deficit of HK$70 million or 1% for the year. Hotel Weakened demand took its toll on the performance of Marco Polo Hongkong Hotel. The hotel has also become less competitive with age. Average room rate exhibited a decline while average occupancy was stable. Revenue decreased by 4% and operating profit by 9%. The Murray, a 336-room sophisticated urban chic hotel in Central under conversion from the iconic Murray Building, has started to ramp up pre-opening expenses to prepare for opening in late Building and land costs will be depreciated over the life of the land lease. That may dilute the segment s results until the hotel reaches stabilisation in several years. China Development Properties Lower sales recognition, principally from Suzhou Times City, trimmed contribution from subsidiaries. Contribution from joint venture/associate projects also declined resulting from reduced sales recognised for Shanghai South Station. Attributable land bank (net of recognised sales) was reduced to about 0.7 million square metres. The U World in Chongqing and Changzhou Times Palace were completed in Full completion of Suzhou Times City and the 27%-owned Shanghai South Station project are scheduled for 2017 and 2022 respectively. Notwithstanding a more positive market arising from the government s loosening measures, the Group s attributable interest in contracted sales dropped to RMB3.4 billion (2015: RMB5.3 billion), which in part was due to project launch schedule and depletion of land bank. 1,105 residential and retail units (total GFA: 161,400 square metres) were sold/presold in The net order book as at year-end was maintained at RMB5.0 billion for 2,010 residential and retail units (total GFA: 249,000 square metres). Investment Properties Suzhou International Finance Square ( IFS ), an iconic landmark prominently located in the new CBD overlooking Jinji Lake and adjacent to Xinghu Street MTR station (Line 1), is set to stand out in a soft market. The 299,000 square metres of Grade A offices, a premium boutique hotel, sky residences and luxury apartments are mainly due for completion in HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

9 BUSINESS AND FINANCIAL REVIEW Hotel Performance of Marco Polo Changzhou is improving but still in pre-stabilisation mode. The hotel has been building its business through strategic expansion of its client base. First revenue contribution from the 133-room luxury sky hotel at Suzhou IFS is poised to begin in early 2019 the earliest. Outlook Looking ahead, trading conditions are likely to be uncertain in 2017 but completion of pre-sold DP projects would be positive to Group results. However, DP contribution will substantially decrease after 2017 as the project pipeline will be mostly depleted. Initial expenses for the IP and Hotel projects under development will also put pressure on the Group s cashflow and profits in their early years. Substantial net cash outflow is budgeted for FINANCIAL REVIEW (I) Review of 2016 Final Results Amid soft markets and volatile profit recognition for development projects, Group core profit decreased by 36% to HK$762 million (2015: HK$1,194 million). Revenue and Operating Profit IP revenue declined by 8% to HK$315 million (2015: HK$344 million) and operating profit by 8% to HK$283 million (2015: HK$309 million). The fall in retail turnover rent from Marco Polo Hongkong Hotel ( MP Hong Kong ) was partially compensated by full year rental contribution from the Star House units which had been under renovation in 2015 to prepare for a new tenant. Hotel revenue fell by 2% to HK$616 million (2015: HK$628 million) and operating profit by 6% to HK$130 million (2015: HK$138 million), partially due to lower room rate recorded by MP Hong Kong, although operating loss of Marco Polo Changzhou ( MP Changzhou ) was narrowed. DP revenue decreased by 37% to HK$2,482 million (2015: HK$3,930 million) and operating profit by 59% to HK$425 million (2015: HK$1,041 million), which was mainly attributable to lower recognition from Suzhou Times City. Inclusive of joint ventures and associates, DP core profit retreated by 52% to HK$343 million (2015: HK$719 million). Operating profit from Investment and Others, comprising mainly interest and dividend income, fell by 1% to HK$145 million (2015: HK$146 million). On consolidation, Group revenue decreased by 30% to HK$3,558 million (2015: HK$5,048 million) and operating profit by 40% to HK$969 million (2015: HK$1,622 million). Contracted DP Sales Inclusive of joint ventures and associates on an attributable basis, the Group contracted property sales totalling RMB3,355 million (2015: RMB5,264 million). The net order book at year end stood at RMB4,977 million (December 2015: RMB5,056 million) that is available for recognition in stages on completion of various DP projects. HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

10 BUSINESS AND FINANCIAL REVIEW Change in Fair Value of IP The Group s completed IP were stated at fair value based on an independent valuation as at 31 December 2016, resulting in a revaluation deficit of HK$70 million (2015: surplus HK$37 million). IP under development were carried at cost less impairment, if any, and would not be stated at fair value until the earlier of their fair values first becoming reliably measurable or the dates of completion. Other Net Income Other net income decreased by HK$48 million to HK$31 million, mainly because a profit of HK$48 million from the sale of equity investments was recognised through other comprehensive income, following the adoption of the new accounting standard (HKFRS 9), against a profit of HK$33 million credited to income statement in Finance Costs Net finance costs amounted to HK$57 million (2015: HK$59 million) after interest capitalisation of HK$15 million for the Group s projects. Share of Results after Tax of Joint Ventures and Associates Joint venture profit was HK$176 million (2015: HK$95 million) with further recognition of The U World in Chongqing. Associates recorded attributable profit HK$23 million from Shanghai South Station project (2015: HK$133 million) in the absence of phased completion. Income Tax Taxation charge for the year decreased by 38% to HK$310 million (2015: HK$502 million) following lower DP profit recognised for the year. Profit Attributable to Equity Shareholders Group profit attributable to equity shareholders for the year amounted to HK$692 million (2015: HK$1,231 million), representing a decrease of 44%. Core profit, excluding IP revaluation differences, decreased by 36% to HK$762 million (2015: HK$1,194 million). Earnings per share ( EPS ) was reported at HK$0.98 (2015: HK$1.74) based on million issued shares. Excluding IP revaluation differences, EPS was HK$1.08 (2015: HK$1.68). Early Adoption of HKFRS 9 Financial Instruments The Group has early adopted the complete version of HKFRS 9 Financial Instruments in its consolidated financial statements with effect from 1 January As a result, the investments in equity securities of HK$2,301 million that were previously classified as available-for-sale investments under HKAS 39 have been re-designated as equity investments measured at fair value through other comprehensive income. Based on this new standard, HK$48 million gain on disposal of equity securities in the year was recognised through other comprehensive income instead of the income statement as previously accounted for (2015: HK$33 million profit through the income statement). 8 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

11 BUSINESS AND FINANCIAL REVIEW (II) Review of Financial Position, Liquidity, Resources and Commitments Shareholders and Total Equity As at 31 December 2016, shareholders equity stood at HK$15,829 million (2015: HK$16,185 million), equivalent to HK$22.33 per share (2015: HK$22.84 per share), net of an exchange deficit of HK$405 million on translation of the Group s RMB5.3 billion of net assets and an attributable investment revaluation deficit of HK$151 million. Including non-controlling interests, the Group s total equity amounted to HK$16,546 million (2015: HK$17,330 million). MP Hong Kong and MP Changzhou hotel properties are stated at cost less accumulated depreciation in accordance with prevailing Hong Kong Financial Reporting Standards ( HKFRSs ). Restating these hotel properties to independent valuation as at 31 December 2016 would give rise to an additional revaluation surplus totalling HK$3,903 million and increase the Group s shareholders equity as at 31 December 2016 to HK$19,732 million, equivalent to HK$27.84 per share. Assets and Liabilities Group total assets decreased by 5% to HK$28,114 million (2015: HK$29,651 million). Total business assets, excluding bank deposits and cash, equity investments, deferred tax assets and other derivative financial assets, maintained at HK$20,659 million (2015: HK$20,707 million) mainly due to increase in hotel and IP under development offset by DP from sales recognition. Geographically, business assets in the Mainland decreased by 8% to HK$9,245 million (2015: HK$10,002 million), representing 45% (2015: 48%) of the Group total. IP IP increased by 5% to HK$8,277 million (2015: HK$7,876 million), representing 40% (2015: 38%) of the Group total business assets. Hong Kong IP amounted to HK$5,344 million (2015: HK$5,414 million), comprising mainly MP Hong Kong s podium valued at HK$4,760 million. Mainland IP, mainly Suzhou IFS under development, was stated at book cost of HK$2,933 million (2015: HK$2,462 million). Properties for Sale/Interests in Associates and Joint Ventures Mainland DP decreased by 27% to HK$1,957 million (2015: HK$2,699 million) reflecting sales recognition at Suzhou Times City and Changzhou Times Palace. In addition, DP undertaken through associates and joint ventures amounted to HK$3,225 million (2015: HK$3,647 million). Other Business Assets Other major business assets included hotel properties at MP Hong Kong, The Murray, MP Changzhou and other property and equipment with book cost totalling HK$6,529 million (2015: HK$5,677 million). Pre-sale Deposits and Proceeds Pre-sale deposits and proceeds increased by 7% to HK$5,030 million (2015: HK$4,691 million), reflecting contracted sales to be recognised as revenue by stage in the future. HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

12 BUSINESS AND FINANCIAL REVIEW Net Cash and Gearing Net cash increased to HK$1,904 million (2015: HK$1,647 million), consisting of HK$5,154 million in cash and HK$3,250 million in bank borrowings. Finance and Availability of Facilities and Funds As at 31 December 2016, available loan facilities amounted to HK$4,850 million, of which HK$3,250 million were utilised. Debts were principally denominated in Hong Kong dollar ( HKD ) and in floating rate. Further borrowings will be sourced to finance the property and hotel development projects. The use of derivative financial instruments is strictly controlled. The majority of the derivative financial instruments entered into by the Group are primarily used for managing and hedging the Group s interest rate and currency exposures. The Group continued to maintain a reasonable level of surplus cash denominated principally in HKD and RMB to facilitate business and investment activities. As at 31 December 2016, the Group also maintained a portfolio of equity investments mainly consisting of blue chip listed securities with an aggregate market value of HK$2,301 million (2015: HK$2,450 million), which is available for liquidation to meet needs if they arise. The performance of the portfolio was largely in line with the general market. Net Cash Flows for Operating and Investing Activities For the year under review, the Group generated a net cash inflow from operating activities of HK$2,792 million (2015: HK$3,056 million), mainly attributable to pre-sales proceeds net of construction cost payment for the Mainland development projects. For investing activities, the Group recorded a net cash outflow of HK$1,423 million (2015: HK$1,451 million), primarily for The Murray and Suzhou IFS projects. Commitments to Capital and Development Expenditure Major capital and development expenditure in the coming years totalled HK$7.8 billion. HK$3.3 billion of that was committed (HK$1.4 billion for The Murray and HK$1.9 billion for Mainland projects). Uncommitted expenditure of HK$4.5 billion is mainly for the existing Mainland DP projects to be incurred by stage in the coming years. The above expenditures will be funded by internal financial resources, including cash currently on hand, as well as bank loans. Other available resources include equity investments that can be liquidated when in need. (III) Human Resources The Group had approximately 900 employees as at 31 December Employees are remunerated according to their job responsibilities and the market pay trend with a discretionary annual performance bonus as variable pay for rewarding individual performance and contributions to the Group s achievement and results. 10 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

13 BUSINESS AND FINANCIAL REVIEW BUSINESS MODEL Harbour Centre Development Limited is a listed subsidiary of The Wharf (Holdings) Limited ( Wharf ), with property and hotel development and investment in Hong Kong and the Mainland as its core business. DP in the Mainland has been dominating financial performance since It accounted for 70% of Group revenue and 45% of core profit in However, 93% of developable GFA have already been sold/pre-sold (and 80% recognised) up to the end of The DP land bank has not been replenished and depletion will continue. In Hong Kong, flagship assets include MP Hong Kong and The Murray. The former, strategically located in Harbour City in Canton Road, has long been a core operating asset. The latter, a prominent landmark building standing on a prime site in Central, is being converted into an urban chic hotel, with target opening in late In the Mainland, MP Changzhou opened in 2014 and IP Suzhou International Finance Square is due for completion in 2018, which will comprise Grade A offices, luxury apartments, sky residences and a premium boutique hotel. BUSINESS STRATEGY The Group endeavours to generate return to shareholders through: (a) (b) (c) Leveraging Wharf s core competencies in development and marketing to generate profits from DP business in the Mainland; Owning and operating prime hotels and IP through continuous product and service enhancement to maximise income and value; and Exercising prudent and disciplined financial management at all times. HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

14 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT REPORTING STANDARD AND SCOPE Harbour Centre Development Limited ( HCDL or the Company ) ESG Report is prepared according to the requirements detailed in Appendix 27 Environmental, Social and Governance Reporting Guide (the Guide ) issued by The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The scope of this Report is restricted to our core operations in Hong Kong, namely Marco Polo Hongkong Hotel ( MP Hong Kong ) with the aim of including The Murray and our Mainland China operations in future reports. This Report covers the financial year ended 31 December 2016 (the reporting year ) and addresses all the General Disclosures under each Aspect of the Guide. HCDL shall aim to collect data to address material Key Performance Indicators ( KPIs ) in our next report. 1. Our Environment Emissions HCDL is keen to play its part in the global effort to reduce greenhouse gas emissions. We have taken our first step by joining the Carbon Audit Programme of the HKSAR Environmental Protection Department ( EPD ). The carbon audits have been scoped to MP Hong Kong and the latest emissions figures are available online on the Carbon Footprint Repository for Listed Companies in Hong Kong 1. With the collection of more comprehensive data, we are looking to expand our reporting scope and implement solid emission reduction strategies. Use of Resources Given the service-oriented nature of MP Hong Kong, the use of resources primarily arises from maintaining a comfortable environment for our guests. Thus, the hotel aims to drive efficiency improvements in electricity and fuel consumption. For instance, guestroom lighting has been replaced by energy-efficient alternatives with longer life spans, namely T5 fluorescent tubes and LED light bulbs. Energy-saving protocols have also been implemented, such as the timely switch-off of air-conditioning and computer systems when not in use. To reduce fuel use, the hotel shuts down the swimming pool steam boiler system in the summer, and trains our hotel vehicle drivers on eco-driving practices. Environmental Mitigation At MP Hong Kong, we actively seek to minimise our impacts on the environment and natural resources. An extensive paper recycling programme has been implemented throughout our operations, ensuring the efficient collection and handling of recyclable paper. We recognise that there is a wealth of green opportunities at each of our operational functions, and is intent on seizing them for a sustainable future. For example, water consumption is reduced through our green programme for guestroom linens. We have placed green cards in our guestrooms, informing guests that the hotel will change towels and bedsheets upon request HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

15 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT 2. Our People Employment The invaluable contributions of our employees have driven continued success and prosperity at HCDL. MP Hong Kong has established clear policies to ensure the needs of our staff are satisfied. A Compensation and Benefits Policy is implemented so that our employees are offered competitive remuneration packages, and company coverage of both dental and medical insurance contributing to their health and wellbeing. Fair and transparent guidelines are also in place for working hours and leave arrangements. The recruitment process at MP Hong Kong is grounded on principles of fairness and equality. Policies have been established to ensure all candidates are offered equal opportunities, regardless of their gender, race, age or any other demographic characteristics. The experience and expertise they can offer is of primary concern. Such antidiscrimination practices are also extended to the day-to-day workplace conduct to nurture a culture of inclusiveness and harmony. Development and Training The continuous development and growth of our staff is strategic for HCDL to respond and adapt to the everchanging business landscape. Employees of MP Hong Kong at all levels are allocated set training hours to equip them with the latest knowledge relating to their work duties. More extensive training, such as management and leadership skills, are regularly organised for our staff in supervisory roles to facilitate informed and perceptive decision-making at all times. In addition, MP Hong Kong staff is eligible to apply for Educational Sponsorships to pursue external professional courses. Health and Safety To provide a safe working environment and protect employees from occupational hazards, MP Hong Kong enforces a stringent Occupational Health and Safety Policy. Sound workplace measures are in place to ensure all risk-bearing activities are monitored and supervised. Fire hazards particularly pose significant threats, and thus our staff are thoroughly briefed on our Fire Safety Guidelines. Newly joined employees also receive comprehensive orientation on the work safety procedures of MP Hong Kong. Our ceaseless efforts in workplace safety have brought about a considerable drop in work-related injuries. Labour Standards At HCDL, we have a number of policies to govern employment including Compensation and Benefits, Antidiscrimination, and Recruitment. For the reporting year, we have complied with all relevant legislations in Hong Kong, including the Employment Ordinance (Cap 57), anti-discrimination legislations 2, the Personal Data (Privacy) Ordinance (Cap 486) and the Mandatory Provident Fund Schemes Ordinance (Cap 485) and there were no established cases against MP Hong Kong. In recognition of our efforts, MP Hong Kong was awarded the Caring Company Logo. 2 Sex Discrimination Ordinance (Cap 480), Disability Discrimination Ordinance (Cap 487), Family Status Discrimination Ordinance (Cap 527) and Race Discrimination Ordinance (Cap 602). HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

16 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT 3. Our Value Chain Product Responsibility At MP Hong Kong, delivering exceptional services hinges on executing responsible corporate practices. Our catering operations adhere to all relevant legislations, including but not limited to nutritional and food allergy labelling. The quality and hygiene of our cuisines are effectively managed under an extensive food safety manual. For example, a monthly food supplier inspection is conducted by the hygiene manager, chef and purchasing representative. We are continually pursuing the delivery of maximum value to our guests. Protecting the data privacy 3 of our guests is also our utmost priority, and therefore strict policies governing its accessibility and usage. By upholding conscientious corporate practices, we endeavour to be accountable for our actions. Supply Chain Management MP Hong Kong recognises that progress in sustainable development can only be achieved when we work with our stakeholders. We take a proactive stance in prioritising suppliers who are concerned with, and address environmental and social risks. Anti-corruption The operations at HCDL are steered by the highest level of ethical business standards. At MP Hong Kong, the established set of policies does not tolerate any form of bribery, extortion, fraud or money laundering. The Business Code of Conduct outlines expected professional conduct during business engagements, while our policy on insider dealings articulates what would constitute an act of malpractice. Comprehensive guidelines are also provided for staff to adhere to the Competition Ordinance (Cap 619). Whether it be our customers, shareholders, employees, or competitors, we strive to act in good faith. 4. Our Community At HCDL, we believe the success of our business also depends on the strength of our community. Throughout the reporting year, MP Hong Kong was engaged in initiatives helping children with special needs, and youth from underprivileged backgrounds by collaborating with charities including Children s Cancer Foundation, Heep Hong Society and Project WeCan partner schools. 3 Personal Data (Privacy) Ordinance (Cap 486) 14 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

17 CORPORATE GOVERNANCE REPORT (A) CORPORATE GOVERNANCE PRACTICES During the financial year ended 31 December 2016, all the code provisions in the Corporate Governance Code (the CG Code ) as set out in Appendix 14 of the Rules Governing the Listing of Securities (the Listing Rules ) on The Stock Exchange of Hong Kong Limited were met by the Company, with one exception as regards Code Provision A.2.1 as explained under section (D) below. (B) DIRECTORS SECURITIES TRANSACTIONS During the financial year ended 31 December 2016, the Company adopted its own set of code of conduct regarding directors securities transactions (the Company s Code ) with terms thereof being no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) in Appendix 10 of the Listing Rules. The Company has made specific enquiry of all Directors of the Company and all Directors have confirmed that they have complied with the required standard set out in the Model Code and/ or the Company s Code during the financial year. (C) BOARD OF DIRECTORS (I) Composition of the Board and Directors attendance records at Board meetings and annual general meeting The Board has a balance of skills and experience and a balanced composition of executive and non-executive directors. The Board composition and attendance records of each Director at Board meetings and annual general meeting during the financial year ended 31 December 2016 are set out below: Directors Number of Meeting(s) (Attended/Held) Annual General Board Meetings Meeting Chairman Stephen T H Ng 5/5 1/1 Non-executive Directors Frankie C M Yick Kevin C Y Hui 5/5 5/5 1/1 1/1 Independent Non-executive Directors Joseph M K Chow 5/5 1/1 H M V de Lacy Staunton 5/5 1/1 Andrew K Y Leung 5/5 1/1 Michael T P Sze 5/5 1/1 Brian S K Tang 5/5 1/1 Each Director has been appointed on the strength of his calibre, experience and stature, and his potential to contribute to the proper guidance of the Group and its businesses. Apart from formal meetings, matters requiring Board approval were arranged by means of circulation of written resolutions. HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

18 CORPORATE GOVERNANCE REPORT (II) Board Diversity Under the Board Diversity Policy adopted by the Board, the Company recognises and embraces the benefits of having a diverse Board towards enhancement of overall performance. With a vision to achieving a sustainable and balanced development, the Company regards increasing diversity at the Board level as an essential element in achieving a diversity of perspectives and supporting the attainment of its strategic goals. Appointments of directors are made on merits while having due regard for the benefits of diversity of the Board. At present, more than half of the directors on the Board are Independent Non-executive Directors ( INED(s) ). They represent diverse career experience in both international and local enterprises. They bring with them diverse professional backgrounds, spanning engineering, infrastructure, textile, financial and securities, banking, trustee services and entrepreneurship. They also hold or have held important public service positions in Hong Kong and China, covering business, industry and commerce, educations, regulatory and politics. The board composition reflects various cultural and educational backgrounds, professional development, length of service, knowledge of the Company and a broad range of individual attributes, interests and values. The Board considers the current line-up has provided the Company with a good balance and diversity of skills and experience for the requirements of its business. The Board will continue to review its composition from time to time taking into consideration board diversity for the requirements and benefits of the Company s business. (III) Operation of the Board The Company is headed by an effective Board which makes decisions objectively in the interests of the Company. The Company s management has closely monitored changes to regulations that affect its corporate affairs and businesses, and changes to accounting standards, and adopted appropriate reporting format in its interim report, annual report and other related documents to present a balanced, clear and comprehensible assessment of the Group s performance, position and prospects. Where these changes are pertinent to the Company or Directors disclosure obligations, the Directors are either briefed during Board meetings or issued with regular updates and materials to keep them abreast of their responsibilities and of the conduct, business activities and development of the Group. Newly appointed Directors receive briefings and orientation on their legal and other responsibilities as a Director and the role of the Board. The Company has also provided appropriate information in a timely manner to the Directors to enable them to make an informed decision and to discharge their duties and responsibilities as Directors of the Company. There is a clear division of responsibilities between the Board and the management. Decisions on important matters are specifically reserved to the Board while decisions on the Group s general operations are delegated to the management. Important matters include those affecting the Group s strategic policies, major investment and funding decisions and major commitments relating to the Group s operations. (IV) Directors Continuous Professional Development The Company has arranged for Directors to attend training sessions which place emphasis on the roles, functions and duties of a listed company director. 16 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

19 CORPORATE GOVERNANCE REPORT According to the records of training maintained by the Company Secretary, during the financial year under review, all the current Directors pursued continuous professional development and relevant details are set out below: Directors Type of trainings (See Remarks) Stephen T H Ng Joseph M K Chow H M V de Lacy Staunton Kevin C Y Hui Andrew K Y Leung Michael T P Sze Brian S K Tang Frankie C M Yick A, B A, B A, B A, B A, B A, B A, B A, B Remarks: A: attending seminars and/or conferences and/or forums B: reading journals, updates, articles and/or materials, etc (D) CHAIRMAN AND CHIEF EXECUTIVE Mr Stephen T H Ng serves as the Chairman and also as the de facto chief executive of the Company. This is a deviation from Code Provision A.2.1 of the CG Code with respect to the roles of chairman and chief executive to be performed by different individuals. Such deviation is deemed appropriate as it is considered to be more efficient to have one single person to be Chairman of the Company as well as to discharge the executive functions of chief executive. The Board of Directors believes that the balance of power and authority is adequately ensured by the operations of the Board which comprises experienced and high calibre individuals, with more than half of them being INEDs. The Chairman is responsible for the Board, focuses on Group strategies and Board issues, ensures a cohesive working relationship between members of the Board and management, and also in his capacity as de facto chief executive, he directly has responsibilities in certain major business units of the Group. (E) NON-EXECUTIVE DIRECTORS Five out of Eight Directors are INEDs, a sufficient number to ensure their views to carry weight and implanting a strong independence element into the Board. The Company has received written annual confirmation from each of the INEDs concerning their independence pursuant to Rule 3.13 of the Listing Rules, and considers that all INEDs are independent and meet the independence guidelines set out thereunder. HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

20 CORPORATE GOVERNANCE REPORT All those existing Directors who do not hold any executive office of the Company (including INEDs) have their respective terms of appointment coming to an end normally three years after their last re-election as Directors or, in the case of newly appointed Directors, at the next following general meeting. The re-election of any INED who has served on the Board for more than nine years is subject to (1) a separate resolution to be approved by Shareholders; and (2) further information to be sent out in the circular to Shareholders the reasons why the Board believes the relevant Director is still independent and should be re-elected. (F) BOARD COMMITTEES (I) Audit Committee The Company has set up an Audit Committee with all its members appointed from the INEDs. All Audit Committee members have sufficient experience in reviewing audited financial statements as aided by the auditors of the Group whenever required. In addition, Mr Michael T P Sze has the appropriate professional qualifications and/or experience in financial matters. Three Audit Committee meetings were held during the financial year ended 31 December Attendance of Audit Committee members is set out below: Members Attendance/Number of Meetings Michael T P Sze (Chairman) 3/3 Joseph M K Chow 3/3 Brian S K Tang 3/3 (i) The Audit Committee terms of reference are aligned with the provisions set out in the CG Code and the recommendations set out in A Guide for Effective Audit Committees issued by the Hong Kong Institute of Certified Public Accountants. Given below are the main duties of Audit Committee: (A) Relationship with the Company s external auditors (a) to be primarily responsible for making recommendations to the Board on the appointment, reappointment and removal of the external auditors, and to approve the remuneration and terms of engagement of the external auditors, and any questions of their resignation or dismissal; (b) to review and monitor the external auditors independence and objectivity and the effectiveness of the audit process in accordance with applicable standards. The Committee should discuss with the auditors the nature and scope of the audit and reporting obligations before the audit commences; and (c) to develop and implement policy on engaging an external auditor to supply non-audit services. For this purpose, external auditor includes any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party knowing all relevant information would reasonably conclude to be part of the audit firm nationally or internationally. The Committee should report to the Board, identifying and making recommendations on any matters where action or improvement is needed. 18 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

21 CORPORATE GOVERNANCE REPORT (B) Review of financial information of the Company (a) to monitor integrity of the Company s financial statements and annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgements contained in them. In reviewing these reports before submission to the Board, the Committee should focus particularly on: (i) (ii) (iii) (iv) (v) any changes in accounting policies and practices; major judgemental areas; significant adjustments resulting from audit; the going concern assumptions and any qualifications; compliance with accounting standards; and (vi) compliance with the Listing Rules and legal requirements in relation to financial reporting; (b) regarding (B)(a) above: (i) (ii) members of the Committee should liaise with the Board and Senior Management and the Committee must meet, at least twice a year, with the Company s external auditors; and the Committee should consider any significant or unusual items that are, or may need to be, reflected in the report and accounts, it should give due consideration to any matters that have been raised by the Company s staff responsible for the accounting and financial reporting function, or for compliance function, or auditors (internal or external). (C) Oversight of the Company s financial reporting system, and risk management and internal control systems (a) to review the Company s risk management and internal control systems covering all controls; including financial, operational and compliance controls, with the support of the Risk Management and Internal Control Committee; (b) (c) to discuss the risk management and internal control systems with management to ensure that management has performed its duty to have effective systems. This discussion should include the adequacy of resources, staff qualifications and experience, training programmes and budgets of the Company s accounting, internal audit and financial reporting functions; to consider major investigation findings on risk management and internal control matters as delegated by the Board or on its own initiative and management s response to these findings and review the statements concerning risk management and internal control to be included in the annual report; HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT

22 CORPORATE GOVERNANCE REPORT (d) (e) (f) (g) (h) (i) (j) (k) to ensure co-ordination between the internal and external auditors, to review and approve the annual internal audit plan, to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company for it to carry out an analysis and independent appraisal of the adequacy and effectiveness of the Company s financial reporting system and risk management and internal control systems, and to review and monitor the effectiveness of the internal audit function; to review the Group s financial and accounting policies and practices; to review the external auditors management letter, any material queries raised by the auditors to management about accounting records, financial accounts or systems of control and management s response; to ensure that the Board will provide a timely response to the issues raised in the external auditors management letter; to report to the Board on the matters in the code provisions in the Listing Rules; to review arrangements employees of the Company can use, in confidence, to raise concerns about possible improprieties in financial reporting, internal control or other matters. The Committee should ensure that proper arrangements are in place for fair and independent investigation of these matters and for appropriate follow-up action; to act as the key representative body for overseeing the Company s relations with the external auditors; and to consider other topics, as defined by the Board. (D) Oversight of the Company s corporate governance matters (a) to develop and review the Company s policies and practices on corporate governance and make recommendations to the Board; (b) (c) (d) (e) to review and monitor the training and continuous professional development of Directors and Senior Management; to review and monitor the Company s policies and practices on compliance with legal and regulatory requirements; to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors; and to consider other topics, as defined by the Board. 20 HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT 2016

23 CORPORATE GOVERNANCE REPORT (ii) The other work performed by Audit Committee for the financial year ended 31 December 2016 is summarised below: (a) (b) (c) (d) (e) (f) (g) approval of the remuneration and the appointment and terms of engagement of the external auditors; review of the external auditors independence and objectivity and the effectiveness of audit process in accordance with applicable standards; review of the half-year and annual financial statements before submission to the Board, with particular consideration of the points mentioned in paragraph (i)(b) above regarding the duties of Audit Committee; discussion with the external auditors before the audit commences, the nature and scope of the audit; review of the audit programme of the internal audit function; review of the Group s financial controls, internal control and risk management systems; and meeting with the external auditors without executive Board members present. (II) Remuneration Committee The Company has set up a Remuneration Committee consisting of Chairman of the Company and two INEDs. One Remuneration Committee meeting was held during the financial year ended 31 December Attendance of Remuneration Committee members is set out below: Members Attendance/Number of Meeting Michael T P Sze (Chairman) 1/1 Stephen T H Ng 1/1 Brian S K Tang 1/1 (i) The Remuneration Committee terms of reference are aligned with the provisions set out in the CG Code. Given below are the main duties of Remuneration Committee: (a) (b) to make recommendations to the Board on the Company s policy and structure for all Directors and Senior Management remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy; to review and approve the management s remuneration proposals by reference to the Board s corporate goals and objectives; HARBOUR CENTRE DEVELOPMENT LIMITED ANNUAL REPORT